INCOME TAXES

6 Months Ended

Apr. 30, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("the CARES Act") was enacted. The CARES Act contains several income tax provisions, as well as other measures, that are intended to assist businesses impacted by the economic effects of the COVID-19 pandemic. The most significant provisions of the CARES Act that will materially affect our accounting for income taxes include, but are not limited to, a five-year carry-back allowance for taxable net operating losses generated in tax years 2018 through 2020, our fiscal years 2019 through 2021, and a technical correction to the Tax Cut and Jobs Act, enacted on December 22, 2017, that provides a two-year carry-back allowance for our taxable net operating loss generated in fiscal year 2018.

Our financial statements for the second quarter and first six months of fiscal 2020 were materially affected by the changes enacted by the CARES Act. U.S. GAAP requires that the effects from changes in tax laws be recognized in the period in which the new law is enacted, which for the CARES Act is our second quarter of fiscal 2020. As a result of the applicable accounting guidance and the provisions enacted by the CARES Act, our income tax provision for the second quarter and first six months of fiscal 2020 reflects the carry-back of taxable net operating losses generated during periods in which the statutory federal income tax rate was 21% to periods in which the statutory federal income tax rate was 35%. Due to the difference in statutory rates, we recorded a $49.4 million discrete income tax benefit related to the carry-back provisions during the three and six months ended April 30, 2020. Because the net operating losses were carried back to years in which we initially reduced our taxable income using the Domestic Production Activities Deduction, we recorded a partially offsetting $11.9 million discrete income tax expense during the three and six months ended April 30, 2020 to account for the reduced taxable income.

The Company’s effective tax rates for the three and six months ended April 30, 2020 were 113.4% and 66.4%, respectively, as compared to estimated annual effective tax rates of 24.7% and 23.8%, respectively, for the three and six months ended April 30, 2019. Excluding the effects of discrete items recognized during the periods, primarily related to the CARES Act, the Company's effective tax rates for the three and six months ended April 30, 2020 would have been approximately 30.2% and 26.9%, respectively, as compared to estimated annual effective tax rates of 24.9% and 24.5%, respectively, for the three and six months ended April 30, 2019. Normally during interim periods, the Company has estimated its annual effective tax rate for the full fiscal year to use when recording the interim period tax provision. Given significant volatility in the poultry markets as a result of the COVID-19 pandemic, as well as factors related to the carry-back provisions of the CARES Act, the Company is not able to reliably estimate its annual effective tax rate for the interim period ending April 30, 2020. Therefore, the income tax provision for the second quarter and first six months of fiscal 2020 was made using the actual effective tax rate for the six-month period ending April 30, 2020.

As of April 30, 2020, the Company's deferred income tax liability was $131.4 million as compared to $74.1 million at October 31, 2019, an increase of $57.3 million. This increase is primarily attributable to the carry-back provisions discussed above, as well as bonus depreciation taken on qualifying assets placed in service during fiscal 2020.